Scrap Recycler profile: Davis Trading & Supply
Built on strong relationships and a keen understanding of global markets, Davis Trading has found longevity in scrap, working from their yard near Vancouver’s downtown core
Located on the edge of downtown Vancouver, Davis Trading had its start in 1909. David Davis founded the company as a horse and buggy style operation - more of a trading company than a recycler - hence the company's full name, Davis Trading & Supply Ltd. Over its more than 100 years in the business, the company has salvaged, traded and recycled everything from glass bottles, inner tubes, cotton and mattresses to used clothing and even horse hair and animal bones.
Through the 1950s and 1960s, Davis Trading began transitioning over to metal recycling, with nonferrous, and more recently ferrous metal, as their focus. Today, run by the fourth-generation family owner Gabe Davis (shown left), Davis Trading is part of the Davis Group of companies, a leader in the Pacific Northwest and West Coast recycling regions, with sites in B.C., Alberta and California.
An Inner City operation
According to Davis Trading's sales and marketing manager, Harold Setynski, the main challenges of operating a scrap-yard in an inner city location are rooted in their relationship with the City of Vancouver. He said that, unfortunately, city officials do not seem to like scrap dealers in their jurisdiction much at all.
"I don't know why. You would expect that a city like Vancouver, that is trying to be one of the ‘greenest' cities in the world, would want to have a clean, paved, recycling centre right outside of its downtown core," said Setynski. "It appears by all accounts that they do not.
"In Vancouver, we are taxed as if we were using the raw land as a development - which is a very nice way of them saying ‘We don't want you here.' When property taxes go up 190 percent in one year, you have to look at things. In the city of Vancouver, land is continually increasing in value, and the way in which the City taxes land is really hurting people."
He said any competitive advantage they have in being close to Vancouver's downtown core is now basically moot.
"When you are paying way more to operate, you can get as much material as you want, but you're not going to be ‘rolling' in cash - or be anywhere close to having an operating budget that is going up every year, when it's just being completely drained out the bottom."
According to Setynski, one other issue they've had recently, and the topic of the September meeting for the B.C. chapter of the Canadian Association of Recycling Industries (of which Setynski is the current treasurer), has to do with a number of yards in the Metro Vancouver area which are struggling to deal with regulations from WorkSafeBC, British Columbia's workplace health and safety regulator.
"It does seem like both WorkSafeBC and our City government are targeting scrapyards in the greater Vancouver area, making it harder for them to do business. These are yards that have been around for upwards of 30 years, some of them 50, some of them longer. These are yards that have zero history of incident."
Setynski said they feel that the City, and local regulators such as WorkSafeBC, have been very clear with how they feel about recycling, and that is has a lot to do with the old, lingering perception of the scrapyard being a dirty place where "dirty things" happen.
"I think it does have to do with that. I think it's unfair. It is what it is, and you have to deal with it. But there comes a point where it's really, really grating on our business."
Davis Trading & Supply Ltd.'s main building at their yard in Vancouver is actually an old barrel-making warehouse. "When you look up at the rafters, you can see all the old little tools and items, all the strings and cords, they're still up there. So it's quite cool. And the building is made out of wood, it's a wood roof and it's got wood buttresses, so it's basically an antique. This building is what we use to house all of our nonferrous."
Outside, their 2-acre yard is completely paved. It's where they keep their piles of ferrous and copper, and where they run their key equipment, including what he calls their ‘hard' baler (a Sierra International T900) for ferrous, an Enterprise nonferrous baler (‘soft baler'), as well as a Bobcat skid steer, four Toyota forklifts and an Exodus wheeled material handler equipped with various attachments.
"Because we are an inner city yard, operating in a relatively compact area, we don't run excavators, and use just one Exodus material handler for loading, unloading and sorting."
As far as environmental, noise and dust issues, Setynski said being close to neighbours in Vancouver hasn't been an issue at all for Davis Trading.
"The company operating next to us, Direct Tap, is a brewery," he said. "They have no problem with our operation. They actually produce more smells than we do. We don't process anything with paint. We don't process anything with oil. There's no elevated risk of fire. We're a ‘dry yard.'"
He adds that they even sweep the street in front of their yard, which is city property. "We use a sweeper attachment on our Bobcat and on our forklifts. We're, for all intents and purposes, upstanding citizens. We're helping the city, but we don't feel like the City is helping back."
At the end of the day though, Setynski feels their relationship with local government and regulators is amicable overall. "With our GM serving as the B.C. chapter president for CARI and myself as the treasurer, we continue to work towards strengthening the lines of communication with local regulators."
Materials in the mix
Being a recycling operation located near a major downtown core is part of the reason Davis Trading has never gotten into the auto recycling side of things. "We don't want to get into the oil," said Setynski. "We run what is called a ‘dry yard.' So you don't want to start getting into the ‘wet yard' side of it. Then you have to dig wells. You have to clean the ground water around you. You have to make sure that there's no spillage. It gets very, very regulated as soon as you start doing that. The regulations are good to have, but just it changes the entire business, basically, at that point."
The material in which they deal mostly, by volume, is aluminum. "It's in part a byproduct of where we are located," he said. "It gets used a lot in Vancouver." After aluminum, stainless steel and copper are the materials they deal with most.
"We ship probably somewhere in the range of 500,000 pounds of aluminum per month. Stainless steel is about 125,000 to 200,000 pounds per month, and I would say we ship around 150,000 pounds of pure copper. We also ship around 125,000 pounds of insulated copper wire, and a bunch of other copper commodities that amount to about a hundred thousand pounds per month, which is sent mostly to China and the U.S."
He said they have also now been dealing in ferrous for about a decade, and they have had good experience with it.
"I'm the nonferrous guy though, so I don't sell our ferrous. Our owner, Gabe Davis, does that. I would guess we ship probably about 200 tons per month of tin, and about 300,000 tons per month total ferrous goes through our yard in Vancouver.
"Some of our steel gets sold directly to mills. The nonferrous side is mostly export to China, or to India or Taiwan, any number of Asia-Pacific countries. And we also ship nonferrous into the United States as well. We don't really keep much in Canada anymore."
With respect to collecting materials, Davis Trading operates a bin service, with outsourced trucking. Collections are made from residential and commercial customers all over B.C., mostly in the Fraser Valley and Lower Mainland area (around Vancouver.)
"Once you start going further out, the cost to get the bin to where it's going is usually more than anything in it, unless there's nonferrous in the bin," he said. "Our area of collection for material is mainly B.C. and Alberta. We also get some material from Washington State, Saskatchewan and even the Northwest Territories and Yukon."
Within the last ten years, Davis Trading has also opened their doors to customers including tradespeople, and what Setynski calls over-the-scale customers - those bringing material in 100 pounds or 50 pounds at a time.
"We opened up that business about 10 years ago, right around the time steel was ‘opening up,' and that's kind of changed who we are a little bit, in that we now often buy from those we are competing against," he said.
"So our relationships become even more important and even more vital because, for us, we don't want to take any business away from our key suppliers - the ones that fill our containers full of material and round out our orders. But at the same time, we don't want to turn people away who are looking to sell us metal. So it's a very interesting juggling act, buying from your competitors, while also maintaining those important relationships."
Longevity in scrap
Despite the taxation and regulatory challenges faced by Davis Trading as an inner city recycler, along with all the general day-to-day challenges faced by scrap recyclers, with volatility of market prices for material, etc., their longevity proves that they are doing things right.
Setynski points to relationships as the key to Davis Trading's long-standing success in the industry.
"With our customers, suppliers and consumers, we are like a middleman, we facilitate trades," said Setynski. "One of the biggest things that Gabe has expressed to me as I take over a lot of what he has been doing over the years (including the buying and selling of nonferrous materials) is that I need to maintain our relationships.
"The prices of metals will go up and down. We won't always have the best price. But with the relationships we cultivate, we're able to get close to the best price, if not the best, every time. Payments and terms, and everything else that we do to cultivate those relationships, will keep the business alive. If you're doing the right things on that end and you have your ‘ducks in a row' on the cost side of things, you shouldn't have a problem."
Setynski noted that the telephone is a key tool for his job of maintaining relationships, as opposed to email.
"A lot of it is phone calls. Email is useful, but it has its limitations, and one of those is tone. People who we deal with are very busy. If you're dealing with a sensitive issue through email, they won't necessarily read it in the tone you're intending. So one of the key elements for us in maintaining relationships is face-time and talk-time. We're on the phones, we talk to our suppliers whenever anything's going on. Communication is huge.
"I'm a believer, and this is something that I think Gabe believes as well, that over-communicating is not possible. For the most part, over-communicating leads to understanding and leads to at least a caring aspect. People know you care. We want to keep our problems to a minimum and when they do arise, they're our problems, they're not anyone else's."
He continued, "So a when a customer sends you a load that doesn't conform, you could send an email with a claim. That's not hard. It's a lot harder to call them and find out what happened. We recently just had an issue where some weights didn't match up, and we actually ended up having no way to reconcile on our end a few of the details. It was just lost in the shuffle.
"And we were happy to pay out the weights because of the long-standing relationship we have with the customer, and the trust that we've fostered.
"From our perspective, the order was shipped and it's not in their facility anymore. Our guy must have missed something when he was unloading three trucks that morning. Things get busy, we have fail-safes in place, but nothing's perfect."
The trust that this kind of attitude has built up between Davis Trading and its customers has been integral to their success. "It's a refreshing thing when your customers are selling you stuff and telling you, ‘No, give me a worse price. I know you have to make some money here too.'
"I think that's unique to Davis Trading," added Setynski. "I've worked in four scrapyards/metal exporters, recycling companies, over the better part of my adult and teenage working life. I've been in scrap for about 13 years, and Davis Trading is the only one where I've ever had someone say, ‘pay me less.'"
Thoughts on China's import ban
On September 1st, Setynski related that one of the largest scrap metal recyclers in the world in terms of brokering, Schnitzer Steel, informed their suppliers that China would no longer be buying copper recovery scrap and wire under 50 percent recovery (with copper content in the wire at 50 percent or lower.)
"That threw the industry through a little bit of a loop," he said. "Immediately, our suppliers were asking if we were dropping our prices."
What he has since concluded is that the way China has decided to go about restricting scrap imports, while perhaps ‘a little bit shady,' at the same time makes a lot of sense. "China has grown. It's a natural progression that they are in," said Setynski. "They are America 50 years ago. What I mean by that is if you go back 50 years, America really started to look at their environmental impacts on their communities. They began to ask, ‘What are these businesses, like steel mills, doing to the environment?' And ‘do we want to have this in our country?' Ultimately, the U.S. over the course of about 30 years, cleaned their industry up a great deal. They regulated it. China is on a natural progression to do the same. They're doing it faster, but they're doing it basically the same way.
"I can't fault them for doing that. They haven't cut out all copper imports or all metal imports. They still want pure aluminum, they still want pure copper. They just don't want the garbage associated with it. And that makes sense. It's a natural progression.
"And there will be a country that decides they want to take over the market for mixed materials," he continued. "Possibly India or Pakistan, for example, with a large population, will say to themselves ‘There's a lot of money to be made in this. We can really help our economy for the next five years if we do this.' It'll happen."
He added that when it comes down to it, there really are just two strategies for North American scrap recyclers facing Chinese import ban restrictions: find alternative markets and produce purer material.
"I think we're probably in a little bit of a tumultuous few months going forward. I think if people have good relationships with their consumers, it won't hit them as hard. If they've been prepared and reading, they will be able to handle it. And for the ones that won't, it's unfortunate, but it'll strengthen the industry as a whole.
"I don't see this being some sort of cataclysmic event that changes how everyone does things. I think that new markets will open up, and I look at it as more of an opportunity than anything else. The relationships we have in place at Davis Trading will sustain us."
Buy and sell in the same market
When asked about any advice he has for scrap recyclers who are starting out, or who are looking to grow their business, Setynski again emphasized a focus on building and maintaining good relationships. He also credits Gabe Davis with another key bit of advice.
"For someone trying to grow their business, the key is to buy and sell in the same market," said Setynski. "You don't want to hold onto something and gamble. Gambling's really fun and you have a good time doing it - but it's never fun when you lose.
"It's always great to make your two to five cents per pound, if that's all you need to make," he continued. "Whatever your profit margin is, get to that and just make it. And if every now and then you make a little more, that is great. When you hold onto material, you gamble.
"Not every deal is the last deal, and usually it isn't," he added. "If you're trying to make money on every single deal you do, that's a good goal to have. The reality is you probably won't. But if you're doing things the right way and you've done your research and preparation over the long haul, it's really hard to lose money in this game." RPN
This article was originally published in Recycling Product News, October 2017, Volume 25, Number 7.